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When viewed with objectivity of purpose, tax evasion and avoidance are problems which seemed to have defied solution, it is a twin devils that had be deviled the Nigerian tax system right from the colonial times. While some people blamed the situation on the tax authorities for not living up to expectation with regards to tax administration, others attribute it to the unpatriotic attitude of the tax payers. The major objectives of this study were: to investigate and determine the causes of tax evasion and avoidance in Akwa Ibom State, to examine the ways through which this problem is perpetrated and to analyze the effects of tax evasion and avoidance in Akwa Ibom State. Data was collected through administering of questionnaire to respondents drawn from the Internal Revenue Authority of Akwa Ibom State and taxpayers in the state.  133questionnaires were randomly distributed to the respondents out of which 170 questionnaires were completed and returned.  Data collected and used in the study were analyzed using bar chart, percentages, the arithmetic mean and standard deviation. Also, the central limit theorem was applied in the analysis. The findings revealed that there are four major causes of tax evasion and avoidance which are; high rates of tax, lack of adequate incentives to both taxpayers and tax authorities, lack of public enlightenment campaign and poverty.  In order to address the problem of tax evasion and avoidance in the state, the researcher recommended that government should embark upon various measures of publicity such as radio messages, television advertisement, post bills etc. it was also recommended that tax authorities should properly review and evaluate the assessment and collection procedures so as to encourage compliance of taxpayers.




It has long been evident that personal income tax in Nigeria has remained the most unsatisfactory, disappointing and problematic of all the taxes in the tax system today, in spite of the fact that tax reform has of recent been a key element in economic reform which the country had undergone (Asada, 1997:1).

The above assertion suggests that tax payers over the ages has demonstrated unpatriotic act through such means as concealment of profit and inference with revenue agent through corrupt practices. It is therefore felt that personal income taxation in Akwa Ibom State nay Nigeria requires radical handling to ensure that a large chunk of the taxable population does not escape tax.  Personal income tax is closely related to the pace of development and growth of the economy.

Therefore, the desire to uplift one’s society is the first desire of every patriotic citizen.  Tax payment is demonstration of such a desire.  The payment of tax is a civic duty and an imposed contribution by government on her subjects and companies to enable her finance or run public utilities and perform other social responsibilities. Taxes, thus constitutes the principal source of government revenue. An effective tax system ought to satisfy the twin purpose of raising maximum revenue and at the same time encourage production. In an effectively managed tax system, the two purposes are not inconceivable provided the beneficial effect of government expenditure and incentives for production exceed the unfavourable effect of taxation.

Adinkrah (1984:2) posited that an effective tax system, aside from maximizing revenue for development, ought, if well structured and managed, elicit a feeling of common purpose, joint responsibility or obligation amongst the taxable persons in a state or a country.

However, one of the greatest problems facing the Nigerian tax system is the problem of tax evasion and tax avoidance. While tax evasion is the willful and deliberate violation of the law in order to escape payment of tax which is unquestionably imposed by law of the tax jurisdictions, tax avoidance is the active means by which the taxpayer seeks to reduce or remove altogether his liability to tax without actually breaking the law.

These “Twin devils” have created a great gulf between actual and potential revenue. The government has for the umpteenth time complained of the widespread incidence of tax avoidance and evasion in the country as companies and other taxable persons employ various tax avoidance devices to escape or minimize their taxes or deliberately employ fraudulent ways and means of evading tax altogether sometimes with the active connivance of the tax officials. As pointed out by Reynolds (1963:5), since tax is a principal source of government revenue, if persons are able to escape by legal or illegal means the tax to which they should logically be subject under the general scope of the tax, the theoretical equity of the tax to a long measure is lost.

Tax evasion and avoidance no doubt deny any government the tax revenue due to her, which result in a gap between the potential and actual tax collection. In an attempt to curb tax evasion, many states such as Akwa Ibom State have adopted different measures to ensure proper assessment and compliance.

This study intends to use the Akwa Ibom State Board of Internal Revenue to look at the problem militating against it as well as attempting to examine the hydra-headed problem of tax collection, evasion and avoidance in our tax system and also proffer suggestions for improvement.


Although tax evasion and avoidance are problems facing every tax system, the Akwa Ibom State situation seems unique when viewed against the scale of corrupt practices prevalent in Nigeria. The major problem lies in the collection of taxes especially from the self-employed such as the businessmen, contractors, professional practitioners like lawyers, doctors, accountants, architects and traders among other.

As observed by Ayua (1999:4) these persons blatantly refuse to pay tax by reporting losses every year. Civil servant and other salaried workers are the only classes of people that actually pay tax in Nigeria. However, many have turned the statutory personal allowances and relief into a fertile ground for tax evasion. Similarly, despite the tax provision meant to plug loopholes through which taxable persons can minimize tax liability, the self-employed persons employ all kinds of avoidance schemes to minimize or escape tax liability. Such scenarios, no doubt say a lot about tax administration system in Akwa Ibom State both in its design and in the disposition of some tax payers towards taxation. While it immediately presupposes that there are legal frameworks put in place to punish tax evaders, it perhaps raises a poser on the efficiency and effectiveness of tax and tax administration in Nigeria. Some state government in an effort towards solving the problem had even gone to the extent of engaging the services of tax consultants. This government effort, notwithstanding, the problem of tax evasion and avoidance still persist (Alabi, 2001:9). There is no doubt that revenue due any government will be reduced by the unpatriotic act of tax evaders.


The objectives of this study are:

(i)                To investigate the determine the causes of tax evasion and avoidance as it relates to personal income taxation.

(ii)             To examine the ways through which this problem is perpetrated.

(iii)           To analyze the effects or consequences (economic or social) of tax evasion and avoidance in Akwa Ibom State.

(iv)           To make suggestions for improved and a more efficient method for effective system of tax collection by government.


The following are the questions this study wishes to answer:

(i)                Does tax evasion and avoidance really have negative effect on the effective administration of personal income tax in Akwa Ibom State.

(ii)             Does the estimated tax figure have a significant relationship or correspond with the actual tax revenue figure generated in the state?

(iii)           Does the problem of tax evasion and avoidance in personal income tax administration have any significant effect on the revenue base of the state?


The study will help broaden our practical and theoretical understanding as well as contributes new ideas to the stock of existing body of literature on the subject matter. It promises to be of a utility to government and other tax regulatory bodies as it will offer them workable suggestions to help resolve the challenges associated with tax evasion and avoidance in personal income tax administration in Akwa Ibom State. It will also serve as a basis for policy formulation on personal income tax mattes.

Students, resource fellows and the wider public seeking information on this issue stand to benefit immensely from the wealth or information contained in this work.


The scope of this work is tax evasion and avoidance with emphasis on its causes, the ways through which the problem is perpetrated and the effect on the economic status of Akwa Ibom State.

However, this study is constraint by inaccessibility of some vital resource materials, under coverage of study area, poor attitude of some respondents and time. Since Uyo being the state capital have been selected as it serve as the nerve centre for the major economic activities in the state in particular, it would have a fair picture of the happenings in these areas. Nevertheless, these constraints did not adversely affect the academic standard and quality of this study.


Taxation in Nigeria started with personal income tax in 1904, when Lord Lugard introduced income tax in the Northern part of Nigeria. Community tax became operative through the Revenue Ordinance of 1904.

In 1917, after the amalgamation of the Northern and Southern protectorates, the 1904 Revenue Ordinance was replaced by the Native Revenue Ordinance of 1917. Furthermore, the provisions of the 1917 Ordinance were amended in 1918 and extended to Southern Nigeria particularly, the West and the Midwest and subsequently to Eastern Nigeria in 1928.  However, the Native Revenue Ordinance was later incorporated into the Direct Taxation Ordinance No.4 of 1940, cap.54.

Still in the pre-independence era, personal Income Tax was administered and collected by the Native Administrations or Local Government in the name of Direct Taxation Under the Direct Taxation Ordinance of 1940, the assessment and collection of taxes were the primary responsibilities of the Native Administrations/Authorities throughout the country and taxes so collected were their main source of revenue. 

In 1943, another ordinance known as the “Income Tax Ordinance of 1943” was promulgated to take care of Lagos residents, who had opposed the 1940 ordinance. Unlike the 1940 Ordinance, the 1943 ordinance was an administration of both poll tax and income tax which were received from the native residents in the township of Lagos and non-native resident in Nigeria by the Central Government for the general revenue of the country.

The Nigerian Income Tax Ordinance of 1943 remained in force in the Federal Territory of Lagos until 1961 when the Personal Income Tax (Lagos) Act of 1961 was enacted by the Federal Government.  The root of the present laws on Personal Income Tax in Nigeria can be traced to the Fiscal Commission set up in 1957, which consisted of Sir Jeremy Rainsman as the Chairman and Professor R. C. Tress as a member among others.

The purpose of establishing the commission was to examine the jurisdiction and fiscal powers of the various tiers of government in Nigeria.  At presence the laws that regulate Personal Income Tax in Nigeria are:


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